Thursday, June 24, 2010

Obama and BP

One thing I'd like to point out in light of all of the GOP attacks on the way Obama treated BP. Republicans have asserted that the 20 billion dollar escrow fund is a "shakedown" and that it is unlawful. Granted, they all backed off because they realized that it was politically a bad position to be in - but was there any merit to their position? I would argue no.

I agree that it would be illegal if Obama was trying to force BP into putting 20 billion into escrow, since damages claims should go through the tort system. But from what I know, Obama simply asked BP to do it, and BP complied instead. This is a subtle difference, but a relevant one.

If someone was to rear end me on the road, I could ask them to give me a few hundred dollars in cash. It would be convenient for both of us, after all. That way, I wouldn't have to deal with the courts, I wouldn't have to call the police. The person who hits be benefits as well, since their insurance won't find out and they end up paying less in the long run. That being said, if the person who hit me refused to give me a few hundred bucks cash, theres no way I could force them to do it. Instead, I would have to use the court system, and would probably try to get more than just a few hundred bucks in damages for my inconvenience.

Obama wanted BP to put 20 billion in escrow because it will result in very rapid payments to people who are injured financially by this oil spill. Obama benefits from this because it is going to be good politics - people will see that he made action on the issue, that people are going to get paid, and that BP is punished. Yet, BP stands to gain as well and I have no doubt that this is one of the reasons they complied with Obama's request. BP knows that using the tort system, they would have had to paid out huge sums of money anyways. Furthermore, not being seen by the American people, investors, the world as cooperating would probably injure their long-term bottom line by damaging their reputation.

Besides Obama and BP, I think the people on the gulf coast are going to benefit from this as well. It took decades for the Exxon Valdez oil spill damages to get paid out to some of the claimants. The tort system is a slow and cumbersome beast. It obviously is the judicator of last resort, but there is nothing illegal about avoiding the tort system if all parties agree.

No comments: